What people are really buying when they buy a Harley-Davidson

  • Harley-Davidson is in the crosshairs in Trump's trade war because it is an iconic American brand.
  • The company recently said it would move production for exported bikes out of the U.S. to dodge retaliatory tariffs from the European Union.

Harley-Davidson is an almost mythical symbol of America to bikers all over the world — its open roads, its uniquely American notions of freedom and rebellion.

So does it matter if some of the actual bikes are made, say, in Thailand?

It might, but it is hard to tell.

The archetypal American motorcycle has recently said it will boost foreign production to avoid import tariffs the European Union has threatened in response to President Donald Trump's own proposed fees on goods brought to the U.S.

The president himself cried foul over the company's announcement, saying that if the company moves production overseas, "it will be taxed like never before" and that "their employees and customers are already very angry" at the company.

The company is in a bit of a tough spot, said Mark DiMassimo, a branding expert and CEO of DIGO. Europe is Harley-Davidson's second-largest market, so it is key for a brand that is already struggling on its home turf. The company's U.S. sales fell 4 percent in 2016 and another 8.5 percent last year.

And part of what buyers are seeking when they buy a Harley is that quintessentially American image.

"Harley is in the middle of this conversation because it is a rare quintessential American brand," he said. "It is one of the rare American brands that is as iconic as the Marlboro man or Budweiser."

That "Made in USA" badge might be important for some of those customers.

"Folks in Europe, when they buy a Harley, they aren’t buying performance," since there are plenty of higher performing European and Japanese motorcycle brands, DiMassimo said. "They are buying Americana."

Even Harley acknowledges this.

"Harley-Davidson maintains a strong commitment to U.S.-based manufacturing, which is valued by riders globally," the company said in a filing with the Securities and Exchange Commission on Monday. Harley wasn't immediately available for further comment Tuesday.

But how much of an impact this recent move could have on sales remains to be seen, and history suggests people don't probe too deeply into questions about brands, such as where the products are made. Much of the rest of the automotive industry is already globalized. Many American buyers of German-branded SUVs like Mercedes and BMW may not be aware those vehicles are made in the U.S., for example.

In like manner, the iconic American beer brand Budweiser is now foreign-owned, and customers seem to have forgotten that, or don't seem to mind, DiMassimo said.

DiMassimo said something like this could cause a temporary dip in sales, or a boost to American competitors, such as Indian Motorcycle, Victory Motorcycles, Zero FX, and others. But it is hard to see bikers burning their Harleys over this.

"I think the good news is people don’t think too deeply about brands," DiMassimo said. "It's hard to imagine that this conversation about Harley will still be going on in six months."

Harley doesn't seem to think it will cause problems either. It said in the filing that it needed to make this move to ensure it could compete in the European market, which is "critical" for the company. In 2016, European sales were up more than 8 percent, but last year that growth came to a halt, and sales in the region fell less than half a percent.

There so far is scant evidence of consumer pushback abroad against Harley bikes made outside the U.S., said William Blair analyst Sharon Zackfia. Harley's sold in Brazil are made locally, and that has not seemed to affect sales there. The lower-priced street bikes the company sells in Europe are made in India, and there does not seem to be much customer pushback there either.

And every bike the company sells into the domestic market is still made in the U.S.

"There is still hope that perhaps the tariff discussion and implementation de-escalates," she said. "I think their preference would be to remain as the status quo. But you can't run your business based on hope. Right now they have a reality that went into effect last Friday, that they have to start to make plans for."